HealthSpring to get $400 million term loans, amend credit facility with Bravo Health purchase

By Sara Rosenberg

New York, Aug. 27 - HealthSpring Inc. plans on getting $400 million in new term loans and amending its existing credit facility in connection with its acquisition of Bravo Health Inc., company officials said in a conference call on Friday.

JPMorgan, Bank of America and Raymond James Bank are the lead banks on the deal.

The company's existing credit facility consists of a $175 million revolver and a $175 million term loan A, with both tranches priced at Libor plus 325 basis points.

Officials declined to comment on interest rates on its debt following this transaction, as that will be figured out with syndication, but did say they expect an uptick of at least 50 bps.

Under the agreement, HealthSpring will acquire Bravo Health, a Baltimore-based operator of Medicare Advantage coordinated care plans, for $545 million.

The plan is to draw $100 million under the currently undrawn revolver, and those funds, along with the new term loans and unrestricted cash, will finance the acquisition.

At close, leverage on a pro forma EBITDA basis is anticipated to be 1.6 times, and debt to capital is expected in the mid-to-high 30s.

Also, assuming the transaction closes as anticipated, the transaction should add $0.45 to $0.55 to HealthSpring's 2011 earnings per share, after taking into account expected cost savings.

Officials added in the call that deleveraging will definitely be a focus, with plans to be at pre-deal levels by 2013 by using cash on hand to pay down debt.

Closing on the acquisition is expected by year-end, subject to customary conditions, including federal and state regulatory approvals.

HealthSpring is a Nashville, Tenn.-based Medicare Advantage coordinated care plans.

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